Air India to get a makeover, Tata Sons to cut costs and streamline operations

Tata Sons plans to give Air India a thorough makeover to better position the airline in the competitive skies. This includes streamlining operations, cutting costs, bringing in a new set of directors and making the carrier technologically sound like its counterparts. Tata Sons is paying $2.4 billion to buy a 100% stake in the debt-ridden airline.

A Tata Group executive said once the deal is concluded, TCS would step in to manage the A to Z of Air India’s IT and digital operations. TCS is the technology partner for Vistara, a joint venture between Tata Sons and Singapore Airlines. It also manages the IT and digital systems of Singapore Airlines. In fact, TCS runs the IT systems and applications of most national carriers of other countries except India’s. Tata Sons through TCS wants to improve Air India’s efficiency and reduce operational and maintenance costs.

According to ToI, the carrier will get a new CEO. Sources say Saurabh Agrawal and his finance team from Tata Sons would have to fix the commercial problems at Air India by refinancing costly debt, reducing lease liabilities and re-establishing vendor contracts. A source believes there are high chances that a foreign national will be selected to lead Air India.

There are also rumors that Tata Sons could leverage its ties with aerospace majors Boeing and Airbus for better deals to replace Air India’s older generation planes with more fuel-efficient ones to better compete with rivals. It could also use Air India’s ground handling business unit to service not just its two existing carriers – Vistara and AirAsia India, but other airlines too, which would increase its revenues. Moreover, Taj Sats could be tapped to serve meals to Air India passengers at 30,000 feet.

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Ajay Prakash, president of Travel Agents Federation of India, believes Air India with Tatas could be a phenomenal airline in terms of good quality service and take the airline to its past glory, and that will have an impact on quality of service carriers (low-cost carriers), if they compete with Air India/Vistara for traffic, primarily business traffic. He said such an impact will however take at least two years to take effect.